January 2011 - Predicting how your business will perform in 2011 is similar to throwing a game of darts, says Craig Yarde, CEO of Primrose Alloys Inc., Burlingame, Calif. "However, we feel a positive push going forward," he says. With the recent acquisition of Channel Alloys, Stamford, Conn., product diversity and an evolved website, Yarde says the best is yet to come.
The best assets
In August, metals trading firm Primrose Alloys purchased the assets of 20-year-old aluminum master distributor The Channel Corp., which was renamed Channel Alloys. "We feel that ‘alloys’ better describes the company’s focus on aerospace, automotive and fabrication stock," Chris Howard, president of Channel Alloys, said in a press release. "Together, Primrose and Channel Alloys have key mill relationships in Asia, Europe and South America. In addition to working with aluminum mills, Channel Alloys will now have opportunities to work with stainless and carbon steel bar products, as well."
"We kept all the same people, we kept the same vision that Channel had in stocking for other distributors. We quadrupled Channel’s inventory within the first three months. We’ve added a location in Denver, and we’ve added ten new alloys and products with more than 300 or 400 new SKU numbers," says Yarde. "We shored up what Channel was offering, and we tripled what Channel would have done based on the new products from our sources at Primrose Alloys."
Yarde emphasizes the company uses approved foreign sources, with a cost savings for distributor customers. Primrose and Channel Alloys buy material from approved mills in countries such as Germany, Korea, Japan, China, Italy, Russia, Taiwan and Brazil. "We look at the equipment our mills have, the markets they serve and how easy it is to work with them," says Yarde. Focusing on customer needs allows Channel Alloys to tailor solutions based on the strengths of the various mills. "It’s not always about price but the quality of products we sell," he says. The company serves the aerospace, automotive, energy, industrial, and military and defense markets.
In addition to offering international alternative sources, another component of Channel Alloys that sets it apart from competitors is its product diversification, says Yarde. "We not only have a lot of A and B standard stocking items, we also stock C and D items--more of the hard-to-get products that distributors buy on a daily basis but don’t necessarily want to stock," he says.
The company offers heat-treated aluminum mill products including extruded rods/bars, cold-finished rods/bars and 6061 rolled products with 3003/5052 sheet to be added soon. Inventory is produced in accordance with applicable QQA, ASTM and AMS specifications by ISO 9000 certified producers, and each order includes mill test certificates, according to the company’s website.
Although many distributors have reduced inventory levels, Channel Alloys has been restocking to "help distributor partners maintain or increase their product offering," says Yarde. "It has shifted from stocking distributors with a full range of items to more of an earn-and-turn ratio--meaning they’re stocking less and relying on mills more. Channel Alloys has acted as a mill to many distributors who no longer stock as many products as they might have two or three years ago.
"We have, at times, acted as a mill source and a bank where we provide extended credit terms to customers who might have seen their lending slashed in the past few years due to the banking situation in the U.S.," says Yarde. "We’re an asset-based company. We’re strongly positioned financially to weather the economic situation. While most people are destocking, we have the resources to restock and grow our business. We think we can grow another 30 percent to 40 percent in 2011."
Recently the company has revamped its online ordering process in an attempt to generate loyalty within the metals markets, says Yarde. "Ten or 15 years ago, when you wanted to know how aluminum- or nickel-based products were going to do as a commodity, you used to call the billet producers or the trading companies. It was purely a supply-and-demand formula as to why markets went up and down. In today’s market, you call your bank’s trading floor to determine what types of hedges were placed on metal and to see where the currency markets have moved," he says. "There has been a paradigm shift from the traditional supply/demand formula to a less predictable, pure banking dynamic, [which is] less controlled by the manufacturers. World markets and money movement in or out of the commodity at any given time cause price manipulations leading to a quiet chaos within the market." Yarde adds that 20 percent price swings on products can occur within a month. In the past, it would have taken two or three years to see those variations.
A customer can log in to Channel Alloys’ website and check where a certain item is in stock among its seven locations across the country, including Atlanta, Chicago, Denver, Houston, Los Angeles, New Jersey and Seattle. "Not only is it a place you can shop and order online, you can also quote online. We think that can save our distributor’s customer--from the sales desk to the purchasing desk--valuable time not to make that call and wait for a salesperson," says Yarde.
In addition to real-time metal price charts, statistics and technical specifications of popular alloys, the site provides a metal weight calculator, which calculates the shipping weight of specific alloys and shapes. These services are available around the clock, 365 days per year. Getting quotes to its customers fast is vital in competing as a master distributor. "A lot of distributors buy at night or they buy in the morning when there’s not always a call center available to take that call. We think it’s definitely going to be the future of our business for more than taking orders but also for providing timely quotations within one or two minutes, as fast as it is for customers to log on," says Yarde.
Channel Alloys’ automotive products are anticipated to increase 10 percent to 15 percent in 2011, says Yarde. The company’s commercial aerospace products will grow in similar percentages. Yarde envisions an increased need for medical devices that use the company’s drawn tubing products. "As the baby boomers get older, there’ll be more emphasis in the medical industry," he says. Although the company foresees a slight decrease in defense products, "if you’ve survived the last few years as a manufacturer, as a distributor or as a mill, the new environment exists with fewer players and reduced competition, which means there are more opportunities," he says. "Overall, Channel Alloys is positioned to service and compete in an ever-changing marketplace." MM